Savills Says S'pore Office Prices To Rise 20%

Source : The Business Times, October 25, 2007

Singapore office asset prices could rise a further 20 per cent on foreign fund investment, but tenants are beginning to resist sharp rent rises amid unease from US sub-prime debt, said consultancy Savills on Thursday.

Foreign investment funds made $3.5 billion (US$2.40 billion) worth of office property purchases in Singapore in the first eight months of this year, almost twice the amount last year and four times more than 2005.

'Strong acquisition demand from foreign investment funds, local companies and developers is likely to continue, driving capital values up by another 15 to 20 percent and resulting in further yield compression,' Savills said.

As prime commercial properties are likely to remain highly sought after, investors will begin to turn their attention to lower grade office assets.

Savills said office rents in Singapore rose by 10 per cent on average between July and September from the April-June quarter, slower than the 15 per cent increase in the previous quarter, as some tenants in the central business district were opting to shift to cheaper suburban locations.

'While some investment banks are considering putting their expansion plans on hold as they adopt a wait-and-see approach, others looked to alternative solutions,' the consultancy added.

Average prime office rents in Singapore are now only slightly cheaper than Hong Kong, while Japan remains the most expensive place in Asia to set up an office, Savills said. -- REUTERS